Can we solve the UK’s low productivity puzzle?
Is intelligent automation the key to our productivity crisis?
A lot of people are worrying about the UK’s productivity, not least the Bank of England’s Governor, Mark Carney in his last press briefing. It seems a strange anomaly that when some of the economic statistics for the UK look good versus our EU colleagues, our productivity (what he described as “doing more with less”) should be so bad. It is currently at 2007 levels and showing very little sign of improving.
George Osborne’s boast that the UK economy last year “grew faster than any other major advanced economy in the world last year [2.6%] and seven times faster than France” may be true, but the statistics show that output per worker in France was 13% higher than in the UK. If you take the shorter working hours in France then they are actually 27% more efficient on a like-for-like basis.
So how are French workers 20% or more efficient than their British counterparts – and what lessons can we learn from them?
At the risk of upsetting my French friends, their statistics are probably not because the French are smarter than us. In fact the Americans are slightly more productive than the French and French productivity is roughly the same as Germany’s.
The current government approach seems to be to leave productivity low because it encourages people into employment – their theory being if there are plenty of low paid jobs then people will take them and not spend their time as an embarrassing statistic. It’s one reason why our unemployment rates are lower than France.
As part of my research for my white paper on automation I spoke recently to a senior director of a major security company who is responsible for their business in Asia. I wanted to understand what their approach was to intelligent automation.
Surely surveillance was an area that was perfect for the intelligent application of technology? His response was that with so much cheap labour available there was no point in making any investment and that politicians would far rather see people employed.
But does this approach make sense? Does it give us any competitive advantage as a nation?
The answer has to be, yes – in the short term. But in the long term it is a disastrous approach because it discourages innovation and investment.
So why are companies taking this approach and what would be a smarter and more sustainable way for boards to think about the future?
I think there are three things a board can do
1. Spend time thinking about the long view of your company’s market. By this I don’t mean write a 10-year business plan, but just think about what the market will look like in 10 years’ time (and if the answer is “same as today” then think again).
Think about some of these statistics and their timeframes
- Skype was launched 12 years ago
- Twitter is only nine years old
- The iPad came out five years ago
- And the iPhone has only been with us seven years
Get some help from people who think about the future – the people in your own business are not the ones to think the unthinkable
- Who and where will customers be?
- Who and where will competitors be?
- What technologies will be available?
2. Then take another long view of your company’s strategy. Where do you want your company to be in 10 years’ time? Do you have a sustainable advantage? Sometimes it helps to imagine that you are in 2025 and looking backwards. Look at your customers, your technology, and your competitors. Where will they be?
3. Given that scenario, what does your company need to do now? Do you need to hire more low paid workers or invest in smart technology? If the answer is smart technology, then start looking at the long term business case.
If most companies, from small to large go through this process, my bet is that we would see a significant increase in investment and a rise in productivity. After all, it’s what the French have done.